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Sensex Close Marginally Lower; Pharma, Bank Stocks Slump
Tue, 21 Mar Closing

Indian share markets recovered in the final hour of trade and finished flat. At the closing bell, the BSE Sensex stood lower by 33 points, while the NSE Nifty finished down by 5 points.

Stocks in the NSE Nifty Index corner nearly 20% of the market capitalization of all listed stocks in India. Naturally, its valuations are a good indicator of market sentiments.

Returns from NSE Nifty at Over 22x PE Multiple

Returns from NSE Nifty at Over 22x PE Multiple

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Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished down by 0.5% and 0.2% respectively. Losses were largely seen in auto stocks, bank stocks and pharma stocks.

Bank stocks were among the biggest losers after Morgan Stanley downgraded a slew of large Indian lenders, citing expectation of weak earnings. Axis Bank share price fell 3.3% and ICICI Bank share price lost 1.1%.

Divi's Laboratories share price fell almost 20% following an import alert issued by the USFDA on products manufactured at its Visakhapatnam unit.

Separately, Dr Reddy's Laboratories share price (down 4.4%) slipped to its 52-week low after it said the US drug regulator issued a Form 483 with 13 observations for the company's formulation manufacturing facility at Duwada, Visakhapatnam.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.37% and the Shanghai Composite rose 0.33%. The Nikkei 225 lost 0.34%. European markets are mixed. The CAC 40 is higher by 0.25%, while London's FTSE 100 is off 0.19%. Shares in Germany are unchanged with the DAX at 12,052.70.

The rupee was trading at Rs 65.29 against the US$ in the afternoon session. Oil prices were trading at US$ 48.67 at the time of writing.

Avenue Supermarts share price, the parent of D-Mart, saw a stellar listing on Tuesday as it surged 114% after its initial public offer (IPO) to raise Rs 18.7 billion was subscribed more than 100 times earlier this month.

Avenue Supermarts shares opened 102.14% higher on the BSE at Rs 604.40 a piece, compared to the issue price of Rs 299 per share, which was the upper end of the price band.

The company intends to use the proceeds from the IPO to repay debt (Subscription Required) of Rs 10.8 billion, fund the construction and purchase of fit-outs for new stores to the tune of Rs 3.66 billion, and the rest for general corporate purposes.

In news from oil & gas sector, Oil India has received its board's approval to buyback 5.60% of its paid-up share capital for a consideration of Rs 15.27 billion. The company's board has approved the buy back at Rs 340 a share.

The board aims to buy back up to 44.9 million shares of the company. As the promoter, the government currently holds 536.1 million shares totaling 66.89% of Oil India.

The central government hopes to raise Rs 450 billion from disinvestment of public sector units this fiscal. Till now, it has raised close to Rs 400 billion through measures including buybacks, stake sales as well as exchange traded funds.

Oil India share price finished the day down by 0.7% on the BSE.

In another development, the government has set a target to reduce oil imports by 10% by 2021-22 in a bid to reduce crude oil imports and to enhance oil and gas production. Union Petroleum and Natural Gas Minister Dharmendra Pradhan, has said that the government is taking several steps to enhance exploration and production of oil and gas in the country and assured that there would be no conflict between oil & gas production and agriculture farming.

The minister elaborated that oil companies are implementing new technologies to enhance recovery from ageing fields and are also taking several measures to revive the sick wells to increase oil production, such as improved Oil Recovery/Enhanced Oil Recovery schemes.

At present, the crude oil import account for 82% of the total domestic consumption and for last financial year, the same was at 80.9%. Over the last three financial years, the amount of imported crude has been on the rise. In 2013-14, it stood at 77.6% and rose to 78.5% in 2014-15.

Oil & gas stocks languished in red with Chennai Petroleum and Hindustan Oil Exploration leading the losses.

Moving on to news from stocks in telecom sector. Idea share price (down 4.8%) continued to fall for the second straight session after it agreed to merge with Vodafone India to create the country's largest mobile phone operator worth more than US$ 23 billion.

Analysts are of the view that the Idea-Vodafone merger will create a strong player, but multiple challenges from the deal, including breach of spectrum holding and revenue market share cap, will have to be resolved in a fixed timeframe. Also, the competition in the industry is unlikely to subside in the medium term despite the mega merger.

Bharti Infratel share price finished up by 1.4% after Nettle Infra Investments bought about 21.63% stake in company from promoter Bharti Airtel.

And here's a note from Profit Hunter:

The pharma sector has been the worst-performing sector since the market bottomed out in February 2016. The Nifty 50 Index gained 28% from February lows, but the Nifty Pharma Index is down more than 5%.

Today, the pharma index is down 2% and Divis Laboratories is the major contributor to the fall. The stock hit a lower circuit and is down more than 20% for the day.

Divis Lab at a New 52-Week Low
Divis Lab at a New 52-Week Low  

The stock topped out at Rs 1,381.60 in August 2016. Currently, it is trading at Rs 640, 54% below its peak. The stock opened gap down today and hit a new 52-week low after the company received an import alert from the USFDA for its Vizag unit. The fall came with extremely heavy volumes - the highest, in fact, in ten years. This indicates immense weakness in the stock.

The moving average convergence and divergence (MACD) indicators also gave a negative crossover near its zero line. This indicates further weakness in the counter.

But now the stock is close to its important support level of Rs 600.

With so much weakness in the stock, it will be interesting to see if it can find some ground near 600.

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May 23, 2017 10:33 AM

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